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Sunday, January 29, 2012

Remittances: How Filipino abroad keep the Philippines's economy alive

By Cai U. Ordinario / Reporter

LET us imagine the Philippines without its overseas Filipino workers (OFWs) and assume there are no temporary and permanent migrants and millions of Filipino families do not receive any remittance from abroad.

This would mean that the 5 million to 10 million Filipinos who currently make up our OFWs (temporary, permanent and illegal migrants) are included in the country’s labor force, sharing in the roller-coaster ride of queuing in job fairs, crowding the Metro Rail Transit every morning, and joining the country’s largest-growing industry, the business-process outsourcing sector.

Their sheer number would undoubtedly expand to unimaginable proportions in the coming years—especially with more than a million newbies joining the labor force yearly. With the current severe lack of employment opportunities, Secretary General Romulo A. Virola of the National Statistical Coordination Board said there would be a high possibility that the informal sector would take up the slack, creating a thriving and robust informal economy.

But, Virola said, without the remittances, poverty would be higher than the 2009 figure of 26.5 percent encompassing 23.14 million Filipinos. It is widely known that while many OFW families are not poor, their remittances impact greatly on their lives and in the communities where they belong, through some form of assistance or employment-generating activity, like building new houses.

Director General Cayetano W. Paderanga Jr. of the National Economic and Development Authority (Neda) said overseas Filipino remittances used for constructing homes for their families do not only benefit these families but create employment in the community and feed its retail trade through the purchase of construction materials, new home appliances and other items.

Further, for those OFWs who are quite comfortable with their salaries, they also share their blessings with their neighbors by donating part of their hard-earned salaries to projects like the construction of churches, assistance to families in mourning and other contributions to the community.

“Our economy will not collapse without remittances but we would be faced with a difficult situation. Remittance is already a feature of the Philippine economic situation. This is why we are focusing on the right policies to help our OFWs. We really owe a lot to our kababayans who venture out,” Paderanga said in an interview conducted over the telephone.

Challenges and opportunities

LIFE without remittances would be difficult to imagine. So much so that former Budget Secretary Benjamin Diokno said zero remittances was unlikely. The only likely scenario is a 10-percent contraction in such remittances, which would mean the return of 1 million OFWs and a cut in the remittances by about $2 billion.

Diokno said this would certainly worsen unemployment in the country and reduce the remittances by close to P88 billion or 0.9 percent of the country’s gross domestic product (GDP). This does not include the “multiplier effect,” meaning, “a significant contraction as a result of lower consumer spending and private investment.”

Because of the multitude of ways OFWs can contribute to the economy, the exact multiplier effect of their remittances has not even been determined to date. The mere act of sending their children to school creates ripples upon ripples of spillovers.

Remittances for the education of children contribute to the salaries of schoolteachers, pay for books and school supplies, apparel, transportation and food, among other things. Some OFWs even go beyond these usual avenues, like the purchase of education plans and homes or condo units near schools.

Indeed, it would be a nightmare without our OFWs and their remittances. The economic resiliency that remittances have provided the Philippines is something that can no longer be dismissed; time and again, these billions saved the economy, to the surprise of many local and international experts.

At the height of the 2009 global financial crisis, for instance, multilateral agencies like the Asian Development Bank (ADB) were saying the Philippines would be ending the year with a contraction in its economic growth like most countries in the region. The country’s heavy reliance on export earnings was a dead giveaway.

But, owing to the family-oriented outlook of Filipinos, those abroad sent more remittances to help their families weather the loss of jobs and livelihoods at the time. Of course, the government also did its part by extending loans and setting up an emergency employment program but every dollar sent over by temporary and permanent migrants eventually bailed out the economy by keeping consumption alive and well.

Again, last year, migrant remittances saved the economy. Amid the economic difficulties in Europe and the United States, the Middle East and North Africa (Mena) crisis, the implementation of indigenization programs in major OFW destinations like Saudi Arabia, and even the earthquake and tsunami in Japan in the first quarter of the year, families of Filipinos abroad continued to receive their regular financial support.

Data from Bangko Sentral ng Pilipinas (BSP) showed that the Philippines received cumulative remittances from January to October 2011 of $16.53 billion or a 6.9-percent growth from the $15.46 billion for the same period in 2010. This, however, was a far cry from the double-digit growth seen in the pre-2009 crisis period when remittance growth was above 10 percent.

Regardless of the slowdown in remittances, amid various external shocks, their impact on the Philippine economy will always be significant because consumption forms 70 percent of the economy. This is why remittances have been able to keep the economy afloat amid various crises.

Jeremiah M. Opiniano, OFW Journalism Consortium president, told the BusinessMirror that studies have shown that if the Philippine economy were to absorb all Filipinos abroad, the national government would have to create 13 million to 15 million jobs a year.

Last year the Aquino administration said it was only able to create close to 2 million jobs.

“Unfortunately, the Philippine economy cannot do without OFWs. One, the Philippines has not been able to create enough jobs, and two, if you pull the plug, it will be more difficult for us, especially in a consumption-driven economy,” Opiniano said. “Labor migration is irreversible now.”

While it is true that migration could not be taken out of the equation, other challenges and threats that are as real as night and day abound. Among these, Diokno said, are the indigenization programs being implemented by OFW host countries.

Saudi Arabia is among the countries posing a real threat because most of OFWs there work as domestic help, laborers, professionals like accountants, engineers and architects.

Indigenization—Saudization as it was initially called because Saudi Arabia was one of the first to implement it—is a national policy designed to encourage the employment of more Saudi nationals in the private sector to make them less reliant on expatriate workers.

The 2010 Survey on Overseas Filipinos released by the National Statistics Office (NSO) in July last year showed that the bulk of overseas workers or around 22.1 percent of all Filipinos working abroad were based in Saudi Arabia. The survey was done from April to September 2010. In 2009 only 21.6 percent of OFWs were working in Saudi Arabia.

These indigenization programs, coupled by a weak economy in host countries, Diokno said, will result in cutbacks in job opportunities abroad. With labor-exporting countries like China, Bangladesh, Pakistan, India and Cambodia becoming increasingly viable sources of workers, the competition for jobs abroad gets stiffer as each day passes.

“The normalization process in the Mena area cannot be expected to happen overnight. Of course, Filipinos will continue to have the comparative advantage in seamen jobs, although the demand for them is affected by weaker trade among nations and low normal growth in advanced economies,” Diokno noted.

The way things are going, the current pace of events, Opiniano said the government must prepare for a massive return migration. With many overseas Filipinos only possessing low-end or zero skills, indigenization and stiffer competition from workers from other countries will cause them their positions.

The NSO data showed that 32 percent of all OFWs in 2010 worked as laborers and unskilled workers and they also sent majority of the total remittance received by the country in that year. The remittance sent by laborers and unskilled workers comprised the biggest share with P20.6 billion or an average remittance of P39,000 per OFW.

Data also showed that those who worked as service workers and shop and market sales workers made up 15.1 percent while trade and related workers accounted for 14.9 percent. Plant and machine operators and assemblers accounted for 14.3 percent.

But measures to be undertaken to prepare for return migration must not be focused on entrepreneurship but on the creation of real, actual jobs in the Philippines. “Kaya nga naging OFW ang mga ’yan kasi hindi naman sila marunong mag-negosyo,” Opiniano remarked.

It has also been repeated by the Neda that human-capital development programs will benefit OFWs. The country’s main socioeconomic planning agency said that spending for the training and skills enhancement of returning and aspiring OFWs will not only enhance their skills but make them more resilient to shocks, such as crises or stiffer competition compared to workers from other labor-exporting countries.

In the early part of 2009, the Neda said that the Technical Education and Skills Development Authority (Tesda) was offering skills-enhancement and re-training programs particularly for returning OFWs. In March 2011, due to the Mena crisis, Tesda has been giving priority to repatriated OFWs to avail themselves of their training programs.

Moving forward

IN every queue they form, every contract they sign, the hours they spend taking care of children that are not their own, the many homes they helped build but cannot afford, and every dollar they save, all they have in mind is the future of their families. It is in this way that overseas Filipinos are changing the lives of their families and the nation, as well.

While there are those that have succeeded and became immigrants in various parts of the globe or returned home to their families to live better lives, more continue to struggle with temporary work permits, abusive employers, and second-class citizen statuses in every country they work in.

Given the challenges they now face, the national government must come through for them, in the way overseas Filipinos has, time and again, come through for the Philippine economy. The government’s entrepreneurship programs for overseas Filipinos who want to own businesses is laudable but some overseas Filipinos would prefer to be hired by better companies abroad or here in the country. The government should give them that opportunity.

Time and again, president after president, it has been a dream to make migration an option. And education and other employment programs are the only way for the country to make migration an alternative means of livelihood, not the only means of livelihood of millions.

To leave one’s home and change one’s destiny in a foreign land is a dream for many but it should not be the only dream—Filipinos should dream bigger and that is to change their destiny without having to leave their home and loved ones.

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